Reuters HK – Asian hedge fund managers are waiting with dread to see if tough new short selling restrictions sweep across the region after Australia and Taiwan joined U.S. and UK regulators in cracking down on the practice.

Major Asian markets, such as Japan and Hong Kong, have so far held their fire. But industry executives, many angry with the recent restrictions, said the combination of market volatility and politics makes the outcome impossible to predict.

"My fundamental view is that it is utterly idiotic. In the current market environment, the priority I would have thought would be to encourage liquidity," said Peter Douglas, founder of Singapore-based hedge fund consultancy GFIA.

"Most regulators that I’ve met have been fundamentally quite sensible people, so you have to make the assumption this is driven a mixture of politics and public opinion. And that makes it very difficult to predict the course."

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BusinessWeek- Assets invested in Asia-focused hedge-fund strategies fell about 10% in the first quarter of 2008, with industry assets under management plummeting from $110 billion to $100 billion, according to Chicago-based Hedge Fund Research.

Net allocations to Asia-only strategies also decreased in the first three months of the year, although net allocations to global emerging-market strategies, which include Asian markets, increased by $1 billion.

On a global basis, the hedge-fund industry attracted a net of $16.5 billion in the first quarter (versus receiving $194 billion throughout 2007), with total capital under management virtually flat over the quarter at $1.9 trillion.

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